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regard to the pendency before any State agency or authority of any proceeding relating thereto) and shall give special expedition to the hearing and decision therein."

(b) Section 13 of the Interstate Commerce Act, as amended, is amended by inserting after paragraph (4) thereof a new paragraph (5) as follows:

(5) In any proceeding before the Commission involving an investigation of or authorization or permission for a general adjustment in rates, fares, or charges, or any of them of carriers subject to this part for the transportation of property or passengers, or both, in interstate commerce throughout, or substantially throughout, the United States, or one or more of the three major rate classification territories thereof (Official, Western, or Southern), any such carrier or carriers parties thereto may by petition seek authority or permission of the Commission for a comparable adjustment of rates, fares, or charges for the transportation of like property or passengers wholly within an individual State or individual States. If, in such proceeding, the Commission finds (as it is hereby authorized to do) that authorizing or permitting an adjustment in interstate rates, fares, or charges without authorizing or permitting a comparable adjustment in intrastate rates, fares, or charges would cause, or create a circumstance of, advantage, preference, prejudice, discrimination or burden declared in paragraph (4) of this section to be unlawful, the Commission shall incident to any adjustment it may authorize or permit in such interstate rates, fares, or charges, authorize or permit a comparable adjustment in such intrastate rates, fares, or charges. Pursuant to such authorization the said carrier or carriers, upon making any adjustment so authorized or permitted by the Commission in such interstate rates, fares, or charges may without further authority make a comparable adjustment in such intrastate rates, fares, or charges, and adjustments so made in intrastate rates, fares, or charges shall be observed while continued in effect by the said carrier or carriers, the law of any State or the decision or order of any State authority to the contrary notwithstanding."

SEC. 4. The Interstate Commerce Act, as amended, is amended by inserting after section 13 thereof a new section 13a as follows:

“SEC. 13a. A carrier or carriers subject to this part, if their rights with respect to the discontinuance or change, in whole or in part, of the operation or service of any train or ferry engaged in the transportation of passengers or property in interstate, foreign and intrastate commerce, or any of them, or of the operation or service of any station, depot or other facility where passengers or property are received for transportation in interstate, foreign and intrastate commerce, or any of them, are subject to any provision of the constitution or statutes of any State or any regulation or order of (or are the subject of any proceeding pending before) any court or an administrative or regulatory agency of any State, may, but shall not be required to, file with the Commission, mail to the Governor of each State in which such train, ferry, station, depot or other facility is operated, and post in every station, depot or other facility directly affected thereby, notice at least thirty days in advance of any such proposed discontinuance or change. The carrier or carriers filing such notice may discontinue or change any such operation or service pursuant to such notice except as otherwise ordered by the Commission pursuant to this section, the laws or constitution of any State, or the decision or order of, or the pendency of any proceeding before, any court or State authority to the contrary notwithstanding. Upon the filing of such notice the Commission shall have authority during said thirty days' notice period, either upon complaint or upon its own initiative without complaint, to enter upon an investigation of the proposed discontinuance or change. Upon the institution of such investigation, the Commission, by order served upon the carrier or carriers affected thereby at least ten days prior to the day on which such discontinuance or change would otherwise become effective, may require such train, ferry, station, depot or other facility to be continued in operation or service, in whole or in part, pending hearing and decision in such investigation, but not for a longer period than four months beyond the date when such discontinuance or change would otherwise have become effective. If, after hearing in such investigation, whether concluded before or after such discontinuance or change has become effective, the Commission finds that the operation or service of such train, ferry, station, depot or other facility is required by public convenience and necessity and that such operation or service will not result in a net loss therefrom to the carrier or carriers and will not otherwise unduly burden interstate or foreign commerce, the Commission may by order require the continuance or restoration of operation or service of such

train, ferry, station, depot or other facility, in whole or in part, for a period not to exceed one year from the date of such order. The provisions of this section shall not supersede the laws of any State or the orders or regulations of any administrative or regulatory body of any State applicable to such discontinuance or change unless notice as in this section provided is filed with the Commission. On the expiration of an order by the Commission after such investigation requiring the continuance or restoration of operation or service, the jurisdiction of any State as to such discontinuance or change shall no longer be superseded unless the procedure provided by this section shall again be invoked by the carrier or carriers."

SEC. 5. Section 15a of the Interstate Commerce Act, as amended, is amended by inserting after paragraph (2) thereof a new paragraph (3) as follows:

"(3) In a proceeding involving competition with another mode of transportation, the Commission, in determining whether a rail rate is lower than a reasonable minimum rate, shall consider the facts and circumstances attending the movement of the traffic by railroad and not by such other mode."

SEC. 6. The Interstate Commerce Act, as amended, is hereby amended by inserting immediately after section 20c thereof the following new section:

"Sec. 20d. (1) It is the purpose of this section to aid common carriers by railroad subject to this part in rendering proper transportation service to the public by providing temporary financial assistance to them in obtaining funds to finance or refinance the acquisition or construction of equipment or additions and betterments for use in transportation service and in obtaining funds needed for operating expenses, working capital, and interest on existing obligations, all to the end of fostering the preservation and development of a national transportation system adequate to meet the needs of the commerce of the United States, of the postal service, and naional defense.

"(2) In order to carry out the purpose declared in this section, the Commission, upon terms and conditions prescribed by it and consistent with the provisions of this section, may guarantee any lender, or trustee under a trust indenture or agreement for the benefit of the holders of any securities issued thereunder, by commitment to purchase, agreement to share losses, or otherwise, against loss of principal or interest on any loan, discount, or advance, or on any commitment in connection therewith, which may be made for the purposes set forth in this section, except that there shall be no guarantee of a loan to be used in reduction of the principal of an obligation other than in connection with the refinancing of an equipment obligation: Provided, That in no event shall the aggregate of all loans guaranteed by the Commission, including unpaid interest, exceed $700,000,000, of which no more than $150,000,000 may be loans for operating expenses and interest on existing obligations.

(3) Any such carrier may, prior to December 31, 1960, make application to the Commission, in such form as the Commission may prescribe, requesting guaranty by the Commission as herein authorized and setting forth the amount and term of the loan to be guaranteed; the purpose of the loan and the use to which the proceeds therefrom will be applied; the inability of the applicant to obtain such funds on reasonable terms without such guaranty; the character and value of the security; if any, that the applicant will pledge as collateral for the loan; and that the loan is necessary or appropriate to effectuate the purpose of this section. The application shall be accompanied by statements showing in detail such facts as the Commission my require with regard to the situation of the applicant. The Commission shall give preference to and expedite the consideration of any such application. "(4) No guaranty shall be made under this section

“(A) unless the Commission is of the opinion that the proposed loan is necessary or appropriate to effectuate the purpose of this section;

“(B) unless the Commission is of the opinion that without such guaranty the applicant carrier would be unable to obtain necessary funds, on reasonable terms, for the purposes for which the loan is sought;

"(C) if the loan involved is at a rate of interest which, in the judgment of the Commission, is unreasonably high, or if the terms of such loan permit full repayment more than fifteen years after the date thereof;

"(D) unless the Commission is of the opinion that the prospective earning power of the applicant carrier, together with the character and value of the security pledged, if any, furnish reasonable assurance of the applicant's ability to repay the loan within the time fixed therefor and reasonable protection to the United States.

"(E) unless the Commission is of the opinion that the applicant carrier is not in need of reorganization of its capital structure.

"(F) unless the applicant carrier agrees that it will declare no dividends on its capital stock as long as the loan remains unpaid. “(5) The Commission may consent to the modification of the provisions as to rate of interest, time of payment of interest or principal, security, if any, or others terms and con tions of any guaranty which it shall have entered into pursuant to this section, or the renewal or extension of any such guaranty, whenever the Commission shall determine it to be equitable to do so.

“(6) Payments required to be made as a consequence of any guaranty by the Commission pursuant to the provisions of this section shall be made by the Secretary of the Treasury from funds hereby authorized to be appropriated in such amounts as may be necessary for the purpose of carrying out the provisions of this section.

(7) The Commission shall prescribe and collect a guaranty fee in connection with each loan guaranteed under this section. Such fees shall not exceed such amounts as the Commission estimates to be necessary to cover the administrative costs of carrying out the provisions of this section. Sums realized from such fees shall be deposited in the Treasury as miscellaneous receipts.

“(8) (a) To permit it to make use of such expert advice and services as it may require in carrying out the provisions of this section, the Commission may use available services and facilities of departments and other agencies and instrumentalities of the Government, with their consent and on a reimbursable basis.

“(b) Departments, agencies, and instrumentalities of the Government shall exercise their powers, duties, and functions in such manner as will assist in carrying out the objectives of this section.

“(9) Administrative expenses under this section shall be paid from appropriations made to the Commission for administrative expenses.

“(10) Except with respect to such applications as may then be pending, the authority granted by this section shall terminate at the close of December 31, 1960: Provided, That its provisions shall remain in effect thereafter for the purposes of guaranties made by the Commission.”

SEC. 7. The Interstate Commerce Act, as amended, is amended by inserting after section 25 thereof a new section 25a as follows:

"SEC. 25a. (1) It is hereby declared to be the general policy of the Congress to promote and encourage, in the interest of national defense and public welfare, the construction, reconstruction, reconditioning, or acquisition of equipment and other property used in the transportation business by common carriers subject to the Interstate Commerce Act, and the retirement (in whole or in part) of debt incurred, after the effective date of this section, for such purposes. It is the purpose of this section to provide implementation of this general policy through the establishment by any such carrier of a construction reserve fund, with the privileges and subject to the limitations herein prescribed. Such construction reserve fund shall be established, maintained, expended, and used in accordance with the provisions of this section and rules or regulations to be prescribed by the Interstate Commerce Commission and the Secretary of the Treasury. Such fund shall be maintained in a separate cash deposit or in obligations of the United States or any agency thereof.

“(2) All earnings of the fund shall be deposited in the fund. Such earnings may be withdrawn by the carrier only for expenditures for the purposes established in paragraph (1) of this section. If such earnings are not expended for such purposes within five years from the date of deposit in the fund, 85 per centum of such earnings shall be paid to the United States as a tax, in lieu of any other tax which may be applicable to such earnings.

“(3) In computing the taxable income under section 63 (a) of the Internal Revenue Code of 1954, as amended, of any common carrier subject to this Act there shall be allowed as a deduction, in addition to the deductions specified in that Code, the amounts deposited in the said construction reserve fund prior to the filing of the income tax return of such common carrier for such taxable year, without limitation except that the deduction allowed pursuant to this section shall not exceed in any one year an amount equal to the depreciation recorded in the operating expense accounts for such year under the provisions of the uniform system of accounts prescribed by the Interstate Commerce Commission.

“(4) In computing the gross income under section 61 (a) of the Internal Revenue Code of 1954, as amended, of any common carrier subject to this Act there shall be included all amounts withdrawn during the taxable year

from the said construction reserve fund for purposes other than those specified in paragraph (1) of this section: Provided, That any amount deposited in the reserve fund which shall be permitted to remain in such fund for five years after having been deposited therein shall be considered to have been so withdrawn from such fund on the first day following the expiration of such fiveyear period. Such amounts shall be subject to tax at the rate or rates and shall be subject to the provisions of the Internal Revenue Code of 1954, as amended, applicable to the year in which such amounts were deducted under paragraph (3) of this section (including the interest provisions of such Code as amended, as if a tax deficiency for such year, whether or not a tax deficiency would exist for such year otherwise). For the purpose of this section, any amounts expended or withdrawn from the reserve fund shall be applied against amounts deposited therein in order of the deposits.

“(5) The regulations prescribed by the Interstate Commerce Commission and the Secretary of the Treasury, pursuant to paragraph (1) hereof, shall provide that no amounts may be withdrawn from the construction reserve fund except (a) for the uses prescribed in paragraph (1) hereof or (b) upon payment to the Secretary of the Treasury of the tax deficiency arising thereon under paragraph (4) hereof.

“(6) Amounts on deposit in a consrtuction reserve fund shall not be considered an accumulation of earnings and profits for the purposes of part I, subchapter G, chapter I, of the Internal Revenue Code of 1954, as amended.

"(7) The basis for determining gain or loss and for depreciation, for the purposes of Federal taxes, of any property constructed, reconstructed, reconditioned, or acquired by the taxpayer, in whole or in part, out of the construction reserve fund, shall be reduced by that portion of the deposits in the fund expended in the construction, reconstruction, reconditioning, or acquisiton of such property, or expended to retire debt incurred for such purposes after the effective date hereof: Provided, That no expenditures shall be made from such fund for such purposes in excess of the then adjusted basis of the property to which such indebtedness relates.

"(8) Qualifying expenditures under this section shall include only expenditures which are chargeable to the accounts prescribed and approved by the Interstate Commerce Commission to show the investment of a common carrier subject to this Act in property devoted to transportation service.”

SEC. 8. (a) Clause (6) of subsection (b) of section 203 of the Interstate Commerce Act, as amended, is amended by striking out the semicolon at the end thereof and inserting in lieu thereof a colon and the following: "Provided, That the words 'property consisting of ordinary livestock, fish (including shell fish), or agricultural (including horticultural) commodities (not including manufactured products thereof)' as used herein shall include only those commodities shown as 'Exempt in the Commodity List' incorporated in ruling numbered 107, March 19, 1958, Bureau of Motor Carriers, Interstate Commerce Commission: Provided further, however, That notwithstanding the preceding proviso the words 'property consisting of ordinary livestock, fish (including shell fish), or agricultural (including horticultural) commodities (not including manufactured products thereof)'shall not be deemed to include frozen fruits, frozen berries or frozen vegetables, or property imported from any foreign country."

(b) Unless otherwise specifically indicated therein, the holder of any certificate or permit heretofore issued by the Interstate Commerce Commission, or hereafter so issued pursuant to an application filed on or before the date on which this section takes effect, authorizing the holder thereof to engage as a common or contract carrier by motor vehicle in the transportation in interstate or foreign commerce of property made subject to the provisions of part II of the Interstate Commerce Act by paragraph (a) of this section, over any route or routes or within any territory, may without making application under that Act engage, to the same extent and subject to the same terms, conditions and limitations, as a common or contract carrier by motor vehicle, as the case may be, in the transportation of such property, over such route or routes or within such territory, in interstate or foreign commerce.

(c) Subject to the provisions of section 210 of the Interstate Commerce Act, if any person (or its predecessor in interest) was in bona fide operation on January 1, 1958, over any route or routes or within any territory, as a common or contract carrier engaged in the transportation of property by motor vehicle made subject to the provisions of part II of that Act by paragraph (a) of this section, in interstate or foreign commerce, and has so operated since that time

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(or if engaged in furnishing seasonal service only, was in bona fide operation on January 1, 1958, during the season ordinarily covered by its operations and has so operated since that time), except in either instance as to interruptions of service over which such applicant or its predecessor in interest had no control, the Interstate Commerce Commission shall without further proceedings issue a certificate or permit, as the case may be, authorizing such operations if application therefor is made to the said Commission as provided in part II of the Interstate Commerce Act and within one hundred and twenty days after the date on which this section takes effect. Pending the determination of any such application, the continuance of such operation without a certificate or permit shall be lawful. Any carrier which on the date this section takes effect is engaged in an operation of the character specified in the foregoing provisions of this paragraph, but was not engaged in such operation on January 1, 1958, may under such regulations as the Interstate Commerce Commission shall prescribe, if application for a certificate or permit is made to the said Commission within one hundred and twenty days after the date on which this section takes effect, continue such operation without a certificate or permit pending the determination of such application in accordance with the provisions of part II of the Interstate Commerce Act.

SEC. 9. Subsection (c) of section 203 of the Interstate Commerce Act, as amended, is amended by striking out the period at the end thereof and inserting in lieu thereof the following: "nor shall any person in any other commercial enterprise transport property by motor vehicle in interstate or foreign commerce unless such transportation is solely within the scope and in furtherance of a primary business enterprise (other than transportation) of such person."

Senator SMATHERS. This hearing is being held exclusively on section 5, for the sole purpose of seeing that everyone who might be affected will have an opportunity to be heard.

We spent some 11 weeks in the early session of the hearings. Much of that time was devoted to a discussion of the rate section. However, as a result of those hearings we arrived at some language. And now, in the light of the language, there have been some who have felt that it would work an injustice to them or injury to them. And in order that we could at least foreclose their saying that they had not had an opportunity to be heard, it was deemed to be advisable on the part of the members of the subcommitte, as well as the full committee, that 2 additional days would be made available primarily to those who have some objection to this specific language, after which, of course, the full committee would proceed to vote on a ratemaking section, and particularly in terms of some specific language.

Whether it will be just this or not at the end, we do not know. We are delighted to have as our first witness this afternoon the former Senator from the great State of Montana, a former chairman of the Interstate and Foreign Commerce Committee, the Senator who, in 1940, probably had more to do with the adoption of the then Transportation Act than did anybody else. Of course, I speak of Honorable Burton K. Wheeler.

Senator Wheeler, we are delighted to have you, sir, as our opening witness this afternoon. If you don't mind taking that little chair right there, we certainly will be happy to hear you.

STATEMENT OF BURTON K. WHEELER, FORMER SENATOR FROM

THE STATE OF MONTANA

Mr. WHEELER. Yes, sir.

Mr. Chairman and members of the subcommittee, as the chairman knows, I am here solely because I was formerly chairman of the Interstate Commerce Committee and was one of the managers of the

1 See hearings entitled "Problems of the Railroads," pts. 1-4.

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